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JUDGE Thomas Penfield Jackson calls it a celebrated case, but Microsoft Corp. isn't celebrating. Jackson it was who handed down the Final Judgment on the closely watched antitrust case against Microsoft, beleaguered by an antitrust case backed by 19 states (not to mention 137 other lawsuits filed against the company).

On June 8, Jackson ruled that Microsoft-which the judge called "untrustworthy" and "mono-polistic" among other terms of endearment he had for the Seattle software company-should be split in two companies: One to handle the operating system side of the business and the other to handle the applications (desktop and Internet) side of the fence. In an interview with Asian journalists on June 14, Microsoft chair and self-appointed chief software architect Bill Gates tells the press what he thinks of the decision, and discusses where he wants to take Microsoft, breakup or no breakup.

The interview followed Gates' keynote address at the Asian CEO Summit 2000 held at the Shilla Hotel in Seoul, South Korea, where more than a hundred of the region's top businessmen were invited to listen to Gates talk about how technology and the new economy are changing the rules of business. Only 10 Asian journalists joined Gates at the 50-minute roundtable discussion, and the Inquirer represented the Philippine press.

At times frowning, at times obviously irritated and getting too excited, Gates' trademark cracking voice and unkempt hair served as punctuation marks to the days that have passed wherein he has had to answer questions about the possible breakup of the biggest software company in the world.

As though giving verbal punctuation marks to his argument, Gates stressed that Microsoft is in an extremely competitive industry with many competitors, which in turn is a roundabout way of arguing that Microsoft is not a monopoly.

In short, Gates stressed throughout the interview that Microsoft is still a single company and a breakup should be considered only if and when the time comes for Microsoft to do so.

Gates also talked a lot about tablet computing, speech recognition, broadband, wireless pocket and cellular devices and the next level on which he plans to take Windows. Some say the venture into these new technologies is Microsoft's way of preparing for the challenges which lay on the road ahead, while others surmise that the company is diversifying into new computing domains in preparation for possible government actions.

Gates answers these questions at the Asian roundtable. Infotech's Leo Magno opened the interview with the first few questions:

Why Korea this time, Bill? Did you time it to coincide with the North-South Korea Summit?

No, I had no particular plan to time it with the thing in North Korea (In Pyongyang, Communist North and the South Korean Republic were holding their historic first summit in half a century while Microsoft was holding its own summit in Seoul.) A trip like this is planned literally a year in advance because invitations have to be sent out to the CEOs. I've been to Korea at least once every couple of years to touch base with the customers. It's just a matter of picking locations that are easy for our customers to go to.

I had a meeting this morning with some leading South Korean politicians, and I asked them how many PCs there are in North Korea. And I can't claim there's a deep level of software expertise and the use of technology in North Korea. If they have strong universities and if they train people in software, they'll have a lot of great high-paying jobs for the people. But I'm not sure what business would be like in North Korea. We do face some export restrictions as well, but all that can change in the future.

Has the possibility of a potential breakup of the company really sunk in to you yet or are you just not seeing it as an option right now?

Well, we've made it very clear that we have a great deal of confidence that the higher court will rule on our favor. The higher court already ruled on exactly the issue that's central to the case, and it's very unusual that this judge (Jackson) completely ignored his own appeals court and even said "I'm just ignoring what they said" which went to 100 percent of the case logs. So when the higher court rules, then this thing will be behind us. People simply have to have the patience to wait for that to happen.

How much impact is the recent DOJ ruling going to have on your business and the new development of products? Are you finding your business in a state of flux in Asia because of it?

I was in Taipei yesterday meeting with our customers all day and the issue never came up. In fact the only time it did come up was in the media conference at the end of the day. The answer is pretty simple. We're going through a legal process in the United States and that legal process will not be resolved over the next 12 to 18 months. It will involve a higher court making a decision. That's always the level the decision is going to be made at.

In the meantime, Microsoft is focused on building great software, and in no way does anything happening in this lawsuit affect the way we're going about (our work) and how we're dealing with our customers.

Microsoft has been very careful throughout this process to make sure that employees who build and design software have not been distracted. We would have preferred not to have the lawsuit at all-that's something no company would welcome. But in terms of building our products, the people come in every day, they come to Microsoft because they love to build great software. It's been an issue for the legal department but not for the vast majority of this company. It has not changed the delivery cycle of any of our products.

Recently there was an announcement about another key executive leaving the company and there have been reports about morale being low and staff turnover being high. Any comments?

Our staff turnover at Microsoft at this point is actually lower than any other company in our industry, and that has mostly to do with the fact that we have a tradition of sharing our success with our employees more so than any other company. In fact as a result of our share option scheme, we have a large number of individuals who have accumulated quite a bit of wealth-in many cases in excess of a million dollars. Now that's a great thing. For a lot of people that means they would either retire or take many years off to do many things. But we've got enough great young people coming into the company every year, which is actually exactly what we want. We want our people to be dedicated and enthusiastic and passionate about what they do.

Currently morale is very high because we've just come out of the launch phase with Windows 2000 and that product is proving to be a great success, so we're in an exciting phase where we're now looking at our future strategy. The Next Generation Windows Services strategy which we unveiled to our employees recently in advance of telling the world at large about it, was received very enthusiastically by our people. We have a uniqueness in terms of our researchers and the number of college graduates we employ and it's because of this that the company has always been able to do great work.

What are the essential elements of any settlement you might enter into with the government?

Well the next step in the process is for us to go to a higher court. We have always been open to a settlement proposal, but a lot of energy was put into the settlement attempts previously. There were four months of talks, but the government wasn't willing to continue letting us enhance Internet support for Windows which is contrary to common sense and previous court rulings which we ultimately disagreed with, so I would say it is not likely that, if we were to be approached, a settlement will happen at this time.

Sounds like you don't plan to do any approaching of your own.

Well, we've approached them with incredible energy for four months and nothing since that time has changed, as we remain strong in our position that we need to be able to enhance our own products.

How much of a distraction has this case been to you personally? How much time have you personally spent on these legal issues?

If you looked at my schedule you would see it isn't that high a percentage of my total time. Obviously I'm disappointed to have the lawsuit. It is a distraction to me. It was pretty intense for a while during the settlement talks, but if you take another court case-one we had for five years with Apple Computer as a comparison-that case took up a much greater percentage of my time. That case in many ways was about an issue even more central to how the company works. At that time I think we did a great job of keeping our employees focused on the business rather than the lawsuit, and in the end we succeeded in all aspects of that case even to the point where Apple had to pay for our court fees.

The Gartner Group has said if the company is split in two, the applications side of the business will be the true bearer of the Microsoft kingdom. Do you see the applications side of the business getting even stronger over the coming months?

There are no two sides to Microsoft. We are one single integrated company, doing great software. We do speech recognition. We do tablet PC. We do pocket devices. We improve Microsoft Office.

That's one company. One sales force. One research group.

(At this point Gates was already frowning and becoming emphatic with his words-Ed.)

You're talking about it as if there were two companies already. There aren't. There's just one company doing great software. Because of this we can provide one user interface, one place for customers to go for product support, so this is very beneficial for our customers.

We built the company up from absolutely nothing to a structure that we know makes the most sense.

Your comments on the Cerberos brouhaha?

It's one of those things when the people's desire for controversy exceeds their desire to examine the facts.

We used Cerberos because it is a good security standard, it's a technology we thought we should popularize. We have increased their installed base tenfold since the launch of Windows 2000.

The facts are the facts. The desire for controversy exists independent of the truth in this case.

But what about the legal issues?

The what?

(Again, Gates is visibly losing his temper at this point-Ed.)

The legal proceedings?

There are no legal issues of any kind related to this.

I mean the threatening letter from Microsoft, in a letter from your lawyers?

And you think a letter is a legal proceeding? I'm not aware of that.

Analysts say that it's going to be difficult for Microsoft to dominate in new markets like wireless and broadband in the same way you have dominated the desktop market. Since wireless is going to be such a critical area here in Asia for accessing the Internet-PC penetration is getting lower and the Internet is being accessed from PDAs and cellular-could you say that Microsoft will never be as powerful in Asia as it has been in other markets such as Europe and the United States.

I don't really understand that measure, but the majority of the empowerment that people get when looking at information or creating documents is from full screen devices. You won't take your cell phone and say, "Oh let me write a memo using my telephone." The phone is a complementary device. Numerically, sure, there will be more of it out there but they will be used for specific tasks and will have fairly limited use.

The full screen will remain the main form factor for use in both the workplace and the home, so this will remain the primary device for empowerment, to edit your family video, to create your business plans and to collaborate in digital meetings. Whether it's connected to a wireless network at home or in business, (the full-screen device) will be the primary device of empowerment.

Regarding people's predictions, you know, for every year in Microsoft's history there has been speculation and media coverage saying we have peaked, and every year we just keep surprising people.

Pick a year. I'll show you the analyst's report. They say Microsoft can't get past DOS. Microsoft can't get off the desktop. Home PC penetration will never go over 20 percent. How can Microsoft beat 1-2-3? How can Microsoft beat Novell?

And ironically these reports, these predictions actually don't serve to discourage us but, rather the opposite-they actually excite us.

And today, what do the skeptics say? They say in terms of scalability, we won't beat Solaris (the Unix operating system of Sun Microsystems). But we will. They tell us we can't recover from people who say, "Oh, I'll rewrite all my applications into this one computer language" (referring to Java, again from Sun).

People say, "Isn't the wireless world a new domain?" You bet it's a new domain. And that's good for us. If it's not a new domain then people don't need to buy new software for that. People buy new software if there's a worthwhile reason to do so. We do tablet PCs, we do PocketPCs, we do wireless and XML-that's what people will be expecting from Microsoft. Customers don't just pay us on an ongoing basis. The only reason they pay us is if we keep making improvements to our products that benefit them.

But there is no reason to assume that we are going to continue to be successful since we've been around for the last 25 years. In fact we would prefer that you continue to predict otherwise, and then we will continue to surprise people by going on to be successful in year 26 of our history. Sure, some year, we will blow it-what year will that be? Will it be Year 27, will it be while I'm still working (at Microsoft) or after I've left? Who knows?

Why do hundreds of CEOs want to sit down with Microsoft at an event like today and talk about a strange acronym like XML? Can you imagine that? (They do so) because they realize that great new software is a tool they need to address the opportunities of this whole new world.

Global Linux 2000 is also being held here in Seoul. Is that why you are also here? What are your thoughts about Linux?

Linux is just one of many, many competitors that Microsoft faces. This a very competitive industry. There's Solaris, the Macintosh OS, AIX and many different flavors of Linux. We have a lot of people who do operating systems, like the Palm OS. If you ask which of all these operating systems run against us most of all, it depends on what customer segment you're talking about. Linux could be one of the most important.

We even compete with our current installed base more than anything. These are people who say they just want to stay with their current version of Windows. That's our number one competitor. Linux might only be number two.

The goal we have is always to take software to a new level-whether it's the way we design software around XML, operating systems for tablet computing, handwriting or speech recognition. The way we think about it is in the days of MS-DOS, when that level of capability became unimportant. We came up with the Windows level, then with Windows NT. We've always come out with things we've done in the past and then making it obsolete.

That's how we compete with our installed base-by having these new breakthrough versions that people wanna buy.

(Incidentally, this revealing statement from Gates-that Microsoft ends up competing with its own installed base of customers and that it tries to force these customers to upgrade because their newer technologies are not backward compatible and the older versions become obsolete-was struck out from the official transcript forwarded to the press-Ed.)

Linux is not a competitor in the sense that it does not have any of the features of the products that we ship. It's unique in terms of its business model which is both a strength and a weakness for it, but there's nothing in terms of capabilities (where it competes with Windows). Our contribution is in terms of these capabilities which we think will be very important.

Do you have any plans to invest in Linux applications?

No.

You still have a few months to go before this antitrust case is over. Are you going to spend the time ahead of you now to restructure the company in advance of any breakup?

I've been trying to be very clear about this. (Again, you could see Gates trying to keep his temper in check at this point-Ed.) Nothing we're doing in terms of our development or organization has anything to do with the lawsuit.

Some time ago you were worth about $100 billion, now you're worth a lot less when Microsoft stock plummeted. I think there was even a time when you weren't actually the richest person in the world. Does this bother you?

Well, I was never worth $100 billion. That is not a fact. Whoever told you that is not mathematical. One of the things that I've done is I've started to take my wealth and started putting it into the (Bill Gates) Foundation. In the last couple of years I have given over $20 billion to that foundation. The foundation actually holds those assets in a very conservative form, largely in the form of bonds and not equities. So whatever wealth I have in large part I'm going to move to that foundation. Although I intend to live a while longer and there are no milestones or deadlines for the plan, that is my intention.